International investors spent £2.2 billion on central London new-build property in 2012

16 January 2013

Knight Frank’s new report, International Residential Investment in London, out today, reveals the size of overseas investment into the London new-build sector. It also examines how the financial crisis has changed the dynamics of the market, looking particularly at the rise in investment by Asian buyers. Finally, it analyses who is buying new-build property and why, before highlighting the potential future overseas markets for London property.

Headlines:

Overseas buyers purchased central London new-build property with a value of £2.2 billion in 2012, up 22% from £1.8 billion in 2011

A total of 52 nationalities bought new-build property in central London last year. The most active overseas buyers (ranked by number of transactions) of central London new homes are from Singapore (23%), Hong Kong (16%), China (5%), Malaysia (4%) and Russia (3%)

UK buyers remain the largest nationality group, with a 27% market share

33% of international investors buying off-plan do so to provide children attending London universities with a base in the city

Knight Frank identifies three major factors that have underpinned the appetite for property in London: first, the capital growth potential and opportunity for investment diversification; secondly, the advantageous currency differential for many nationalities; and thirdly, London’s continuing leadership in top-flight education.

The educational opportunities in London are particularly attractive for buyers from Asia, and their preference for new-build property has had an important impact on London, allowing developers to secure funding and maintain healthier construction levels in central London than in the rest of the UK.

Knight Frank expects the core overseas markets to retain their appetite to buy in central London, and also expects domestic share of the market to rise from its current levels. It also forecasts increased investment activity from China, particularly if the restrictions on overseas capital transfer are eased. Turkey will continue to be a key buyer market: its economy has outperformed crisis-hit Western Europe and many of its citizens have existing business and family links with the UK. Indonesia is also a country to watch, Knight Frank says.

Neil Batty, head of International Project Marketing, Knight Frank, says, “Overseas investors will continue to play a vital role in the acquisition of prime central London new-build homes in 2013. They are attracted to London due to advantageous currency values, the opportunity to invest in a tangible asset with the prospect of long-term strong capital appreciation, and the recognition that London continues to offer world-leading educational and cultural facilities.”

Gráinne Gilmore, Head of UK residential research, says: “International interest in London property is not a new phenomenon, but the economic and financial changes since 2007 have created a fresh model for overseas investment in new-build property. Agents report that the appetite for London property remains strong, and there is an increasing interest in London property from a widening range of overseas buyers, especially some emerging economies where economic growth has remained robust during the downturn.”

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